by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
- In a relatively bipartisan hearing, Republicans and Democrats discussed ways Congress could modify the HSA rules to allow high-deductible health plans (HDHPs) to pay for certain medical expenses and services before the deductible is met (while also maintaining an HDHP planholder’s eligibility to contribute to an HSA).
- Analysis: More and more employees are now covered under HDHPs than ever before. Why? Because more and more employers are offering their employees HDHPs. Why? Due in large part to the ever-increasing cost of health care. As an example of increasing costs, PWC just released a study indicating that the cost of employer plans will increase by 6% this year (which is on top of 5.5% to 7% annual increases each year over the past 5 years). For right or wrong, the primary way employers are managing these escalating health care costs is by shifting more and more of the cost on to their employees, in form of increased co-pays and deductibles. Some employers are going “full-replacement,” meaning the ONLY health plan they offer their employees is an HDHP. Interestingly, a 2017 Kaiser Health Survey indicated that 81% of covered workers are enrolled in a “single” health plan with an annual deductible of $1,505, which is higher than the statutory minimum deductible to qualify as an “HSA-qualified HDHP” (e.g., for 2017, the minimum deductible for an HSA-qualified HDHP was $1,300 for single coverage). Some will argue that it is good policy to have more and more employees enrolled in an HDHP. Why? Because they will argue that people covered under an HDHP have “skin in the game,” and if people have “skin in the game,” they will be better consumers of health care. I agree with this argument, but only to an extent. Why? Because while I believe people will indeed be better consumers of health care if they have “skin in the game,” sometimes the “skin” is just too great for a person to bear, and you end up with a person having “insurance” but no real “coverage” (because they have to spend so much out-of-pocket before they reach their deductible). Also, studies have shown that while HDHP planholders are choosing to forego “unnecessary” medical care (which is good), a number of planholders are also choosing NOT to obtain “necessary” medical care (which is bad). Proponents of HDHPs and HSAs have to do a better job of educating employees about making sure they get the care they need, especially before their medical conditions get worse. In addition, HDHPs are NOT for everyone. Specifically, there are a lot of high-medical utilizers out there, most often, people with a chronic condition. Employers recognize that employees with chronic conditions need help managing their health issues. And, employers are trying to do the right thing by developing an HDHP plan design that pays for certain chronic care services before the HDHP’s deductible is met (i.e., the HDHP pays first-dollar coverage for specified chronic care services that are necessary to improve treatment adherence and condition management). This is what I call a “more consumer-friendly” HDHP plan design, and it is a plan design that will likely result in savings to the employer (because employees who better manage their chronic conditions are less likely to incur significant costs because they are attending to their condition, as opposed to neglecting their own health and allowing their condition to get worse). But there is an inherent problem with this plan design: According to the current HSA rules, if the HDHP pays first-dollar coverage for these specified chronic care services (i.e., the plan pays for these expenses before the deductible is met), this HDHP planholder is NO LONGER eligible to contribute to an HSA. I refer to this problem as “eligibility rigidity.” What I mean is, the existing HSA rules are too rigid because if an employer develops innovative plan designs specifically targeted to help people with chronic conditions, employees with chronic conditions – and all other employees covered under this type of HDHP – are UNABLE to contribute to an HSA (and unable to save tax-preferred dollars to pay for out-of-pocket medical expenses). This is not the only “eligibility rigidity” inherent in the existing HSA rules. The existing “rigidity” prevents an employer from adopting value-based care strategies and other cost-containment benefit offerings that pay for “medical care” before the HDHP deductible is met (like certain telemedicine services, or direct-primary care services, or access to near-site/on-site clinics). In addition, an employee whose spouse has a Health FSA is prevented from contributing to an HSA, even though this employee is covered under an HSA-qualified HDHP. Also, the current HSA eligibility rules prevent individuals covered under certain government-sponsored programs like Medicare Part A and TRICARE – as well as those who receive medical benefits paid by the Department of Veterans Affairs (VA) or Indian Health Services – from contributing to an HSA. The attached document talks about this “eligibility rigidity” and calls for consideration of what I call the “The HSA Eligibility Reform Act.” Note, all of the provisions you see in the attached Act have shown up in the various pieces of HSA legislation that have been introduced in the past. But, this suggested Act includes all of these eligibility-related provisions in one place.
The Ways and Means Committee Hearing on HSAs (no news story)
- It was not all kumbaya at the Ways and Means hearing. A number of Democratic members raised concerns that workers with low incomes do not have the necessary disposable income to save money in an HSA. And, they argued that changing the HSA eligibility rules – while quite possibly helping workers with chronic conditions – was not the best way to spend taxpayer dollars. Instead, they argued that taking steps to reduce a worker’s out-of-pocket costs was a better way to spend taxpayer dollars (instead of spending money of tax preferences that are NOT primarily utilized by low-income workers).
- Analysis: There is merit to the argument that low-income workers may not have the disposable income to contribute to an HSA. After all, spending on rent/mortgage, groceries, and other day-to-day items represents a significant percentage of a lower-income family’s income. BUT – at least in my opinion – that should NOT discourage Congress from making HDHPs more consumer-friendly, and it should NOT dissuade Congress from changing the HSA rules to allow employers to adopt value-based insurance designs and other cost-containment benefit offerings. I too want out-of-pocket costs to go down. But – at least in my opinion – we cannot lower out-of-pocket costs until we lower the unit cost of health care. And, spending taxpayer dollars to lower out-of-pocket costs is arguably even more ill-advised than spending taxpayer dollars on tax preferences. Why? Because spending money to lower out-of-pocket costs is simply throwing money at the problem (the government is more-or-less subsidizing the ever-increasing cost of health care). At least with tax preferences, Congress is encouraging behavioral change that studies have shown bends the cost-curve downward. Yes, HDHPs and HSAs are NOT perfect. But if the “eligibility rigidity” problem is addressed, HDHPs and HSAs can be made that much more consumer-friendly, where workers can get first-dollar payments for certain medical services instead of workers being forced to pay for these costs out of their own pocket (it is almost as if Congress could reduce out-of-pocket costs for certain workers without a government mandate to reduce of out-of-pocket costs…who knew…).
- As I discussed last week, there is new lawsuit calling the individual mandate – and by extension the ACA – unconstitutional. As I explained – at least in my opinion – this lawsuit is NOT a winner (see my attached update). Instead – in my opinion – this lawsuit is Republican “political messaging.” BUT, the Department of Justice (DOJ) just threw gasoline on this matchstick of a lawsuit, so now everyone seems to be freaking out over it.
- Analysis: Speaking of “political messaging,” 2 industry experts – Larry Levitt and Nicholas Bagley – apparently got out their mega-phone to stir-the-pot for no good reason other than to politicize this lawsuit. Look, I respect Mr. Levitt and Mr. Bagley, and I also respect their opinion. After all, we all have a right to our own opinions, despite our political leanings. But when opinions are used for what I believe are for political gain, I get a bit bent out of shape. Yes, I have political leanings and opinions too. But, I make it a point to give you both sides of an issue before providing you with my opinion. And, I try very, very hard to never talk in absolutes. But – in my opinion – Mr Levitt and Mr. Bagley know that this lawsuit is unlikely to be successful, yet the only claim they make about the lawsuit is how people with employer plans are going to get screwed. All in an effort – in my opinion – to scare the 155 million or so Americans who are covered under an employer plan. Here’s the deal: I get that for the past 8 years, Republicans have said a whole host of intellectually dishonest things about the ACA. And, one claim that is at the top of list is that the ACA is going to adversely affect employer plans – and that all of the premium increases that we saw in the individual market in 2014, 2015, and 2016 – were going to fall on millions upon millions of people, including those with employer plans. Not an accurate statement. But in the end, Republicans were successful in scaring enough of the millions of Americans who are covered under an employer plan (but who were not going to be adversely affected by the ACA) to disapprove of the ACA, and to say as much at the ballot-box. I get that this drove ACA supporters and the Democrats NUTs. And I get that the urge to play the same political game is hard to resist. And this is why I am so annoyed at Mr. Levitt and Mr. Bagley. Not because I think they are making an intellectually dishonest statement, but because I believe they are getting out their mega-phone to scare the 155 million or so Americans who have employer coverage. Again, I believe there is NO need to further politicize a lawsuit that I believe both Mr. Levitt and Mr. Bagley believe will fail at some point throughout the judicial process. Yes, these 2 gentlemen may feel that they are simply politicizing an issue that Republicans are already politicizing. And to an extent, they would be right. But, I just wish these 2 gentlemen could stay in the camp of being constructive (which is often a lane in which they traverse) as opposed to being politically divisive. That is what I try to do.